On 26 September 2014 the Competition and Markets Authority ('CMA') published the final order in relation to the Competition Commission's ('CC') investigation into the UK statutory audit market for large companies.
The CMA (who replaced both the Office of Fair Trading and the CC in April this year) have ordered, with effect from 1 January 2015, that all large companies (ie. those companies who are listed on the FTSE 100 and FTSE 250 indices) must go out to competitive tender for their statutory audit requirements at least every ten years.
If a company does not competitively tender in the first five years it will be required to set out in its annual report to the Audit Committee when it expects to do so, together with the reasons why holding a tender in that particular year will be in the best interests of the company's members.
The competition authorities believe that more regular switching between statutory audit providers will open up the market to greater competition, ensuring that shareholders' needs are better met.
The order also includes measures to help improve auditor accountability to the Audit Committee and reduce the influence of management in matters such as agreeing audit fees and negotiating the scope of audit work.
The CC conducted the investigation into the statutory audit services market between October 2011 and October 2013. But the CMA delayed making the order bringing the CC's recommendations into effect until now to ensure harmonisation with the EU's own efforts to overhaul the audit market.
If you would like to know more, further information and a copy of the order can be found on the CMA's website.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.